Sberbank information (materials)
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- 2.Position of Sberbank in the Financial Market
1.IntroductionThis Report is a report of the Supervisory Board of OJSC Sberbank of Russia1 on the 2011 results of the Bank's development in priority lines of business. Priority lines of business of the Bank:
In addition to banking transactions, the Bank performs transactions such as granting surety for third parties, acquiring claims from third parties, carrying out trust management of cash, professional activities in the securities market, including broking, dealing and depositary activities. The Report has been prepared pursuant to securities laws of the Russian Federation, including:
The Report has been prepared on the basis of disclosure reporting forms (Russian Accounting Standards, unconsolidated data) and the Bank's internal forms of statistical reporting. Events that occurred after the reporting date of 1 January 2012 and 1 January 2011 have been accounted for. 2.Position of Sberbank in the Financial MarketThe Russian economy developed in 2011 against the backdrop of ambiguous foreign economic conditions. Global trends in international financial markets were primarily related to low or negative growth rates in developed countries the economy of which is characterized by a significant degree of foreign and domestic debt. In the US, these problems manifested themselves in a slow recovery of the economy in the context of political controversies. Europe suffered from an intensifying debt crisis. As a result, the volatility of the Russian stock and forex markets spiked. In particular, in the second half of the year the ruble depreciated from 28.1 RUB/USD in July to 32.2 RUB/USD by year's end in the context of a worsening financial crisis in the Eurozone. The Russian economy continued its recovery growth. In 2011 GDP was up by 4.3 %. It was mainly boosted by consumer spending and restoration of enterprises' stocks. In general, the 2011 growth was based on domestic demand, both in the consumer and investment segments. Foreign demand fell significantly in conditions of global instability, causing deterioration in export-oriented sectors of the Russian economy. Growth slowed down in the extractive industry; growth in the processing industry failed to regain pre-crisis levels. Real income of the population barely increased in 2011. That said, retail trade turnover grew 7.2 % as a result of realization of deferred demand, growth in consumer lending and a lower rate of savings. This had an impact, among other things, on the dynamics of retail services of Russian banks:
Russian banks were actively collaborating with Russian companies and enterprises with 26 % more funds raised from and 27 % more loans granted to them. Sberbank also successfully cooperated with corporate clients, especially in terms of lending, where the Bank managed to enhance its market presence from 31.3 % to 32.9 %. In general, development of the Russian banking system in 2011 was distinctively marked by the fact that lending growth rates were higher than client deposit growth rates. This applied additional pressure on the liquidity of the banking system in the second half of the year. The first half of the year was characterized by excessive bank liquidity. In order to reduce it and dampen down inflationary pressure on the economy, the Bank of Russia starting taking measures in February 2011 intended to tighten monetary and lending policy: banks' reserve requirements were raised three times during the year, the refinancing rate was increased twice, and the deposit rate of the Bank of Russia was increased four times. The interbank market's liquidity sharply fell in Q3 in the context of global instability and difficulty that Russian borrowers faced in raising foreign finance. Interbank interest rates significantly grew with MosPrime rates for overnight loans rising from 2.9 % early that year to 6.5 % in December. The Bank of Russia sharply increased amounts available for REPO transactions, and the Ministry of Finance made deposits in banks in order to maintain low lending rates in the productive sector. Clients' funds remained the main source of funding for Sberbank. Nevertheless, like in the banking system overall, their growth rates lagged behind lending rates. In this respect, Sberbank took measures to raise an additional amount of liquid funds. Sberbank obtained additional ruble liquidity by attracting funds from the Bank of Russia through direct REPO transactions, having the Bank of Russia grant secured loans2 and reducing investments in the Bank of Russia's bonds (their share in the Bank's portfolio decreased by over 430 bn. rubles during the year). Additional liquidity in foreign currency resulted from issuing a bonded debt and obtaining a syndicated loan, and through trade finance operations. Positive sentiment prevailed in Q1 2011 in the Russian stock market. Nevertheless, subsequent events such as an escalating lack of confidence in further growth of the global economy and the continuing crisis of trust in the Eurozone caused global stock markets to plummet twice, in August and September. Ultimately, the MICEX index was 17 % below early 2011 levels by year's end. Sberbank's 3market capitalization also fell from 76.1 to 54.8 bn. US dollars though the Bank remained in the world’s Top 20 banks in terms of market capitalization. The quality of loan portfolios of banks continued improving in 2011. During the year, the share of overdue debt on loans granted to legal entities and retail clients in the banking sector decreased from 5.5% to 4.6%. Sberbank was also particularly focused on the quality of its portfolio. It continued operations as part of business processes launched back in 2010 to recover troubled debt. Systemic collaboration with large, medium, small and micro business on troubled debt helped to reduce legal entities' overdue debt by 33 bn. rubles. Overdue debt of retail clients added 2.3 bn. rubles during the year which, however, is insignificant as compared to the total portfolio worth 1,777 bn. rubles. The fixed-term loan portfolio was growing fast. All measures taken together allowed the Bank to reduce the share of overdue debt on client loans from 5.0 % to 3.4 % and improve the quality of the loan portfolio compared with the aggregate portfolio of the banking system. In 2011 Sberbank restored reserves for a number of loans as part of planned arrangements with troubled assets. As a result, expenses incurred in creating reserves significantly fell by year's end even though the Bank continued creating reserves for new loans. This had a positive impact on the growth of earnings which hit a new record and reached 46.5 % of the total earnings of the country's banking system4. Sberbank's share in different segments of the financial market.
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